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Avation confident on outlook even through coronavirus pandemic

Snapshot

  • Leases commercial passenger aircraft to global airlines
  • Portfolio of 49 aircraft with 18 airline customers
  • Record profits and revenue in past year
airbus a220-300

Quick facts: Avation PLC

Price: 187.5 GBX

LSE:AVAP
Market: LSE
Market Cap: £117.51 m
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What Avation does

Avation PLC (LON:AVAP) specialises in leasing commercial passenger aircraft to various airlines across the world.

Listed on the main board of the London Stock Exchange, the company’s customers include Flybe, Virgin Australia, Air France, easyJet, Eva Air, Philippine Airlines, Air India, Vietjet Air, Fiji Airways, Mandarin Airlines, Cebu Pacific, Garuda Indonesia, Galistair, airBaltic and Danish Air Transport.

The company’s current fleet is comprised of 49 aircraft including Boeing and Airbus models.

 

How it is doing

In January, Avation began a strategic review that could result in the company selling itself, however in April it said it remains engaged with interested parties although the pandemic has delayed progress.

The aircraft leasing company said  it can “successfully operate for an extended period greater than a year”, with total cash of US$129mln, US$53.9mln of unencumbered assets and US$11.1mln in trade receivables as of 7 April.

Some ATR aircraft in its portfolio keep operating normally, while regional routes are expected to be the first segment of the industry to recover from global travel restrictions during the pandemic, as “government, essential and health services are significant users of domestic air travel”.

Avation believes the “economic and travel impact of the pandemic can be mitigated within the next 12 months” and that it will be in a position to continue providing leases to its clients.

However, no dividends will be considered before September 2020 and that it is “probable” that it will not pay a further dividend in 2020 unless a “remarkable global recovery occurs”.

The company is also offering a package of support for its airline clients, most of which had entered into short-term financial relief agreements with the firm.

Half-year revenues hit a record level in 2019, surging to US$67.61mln in the six months to December, up from US$58.73mln the year before.

Profit before tax more than tripled to US$45.21mln, up from US$14.22mln as the company booked a one-off unrealised gain of US$36.98mln on aircraft purchase rights relating to ATR72-600 aircraft. Even excluding this one-off item, the leasing business continued to grow.

 

What the boss says: Jeff Chatfield, Executive Chairman

"Avation posted record lease rental revenue and assets for the period ended 31 December 2019. Most importantly the customer base continued to expand."

"In response to a proposal from an interested party the company appointed an adviser and announced a strategic review and formal sale process. Upon completion of the strategic review and formal sale process the board will consider the recommendations and provide further comment."

 

Inflexion points

  • Completion of strategic review and talks over a possible sale
  • Further expansion into engine leasing
  • Fleet continues to grow

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